Advertisement
retirement

Reporting a Required Minimum Distribution to Charity on Your Tax Return

Up to $100,000 a year of your RMD is tax-free if you transfer it to charity, but be sure you report it correctly on your return to avoid a tax bill.

I read your column about giving your IRA's required minimum distribution to charity, and I have a few follow-up questions. How do I report the distribution on my 1040? Will I get a 1099-R showing that it wasn’t taxable? Also, can I give the RMD from my 401(k) to charity?

If you are 70½ or older, you can transfer up to $100,000 from your IRA to charity tax-free, which counts as your required minimum distribution but isn't added to your adjusted gross income. You cannot make a tax-free transfer from your 401(k) to charity, but you can roll over money from your 401(k) to an IRA and then transfer the RMD to charity. (If you're 70½ or older, you'll have to take your RMD from your 401(k) before you can roll over the balance.)

Advertisement - Article continues below

Report the distribution on line 15a of your Form 1040 as a gross distribution. On line 15b, write $0 for the taxable amount (if you have no other taxable distribution). Be sure to add "QCD" (for qualified charitable distribution) next to that line to explain why the distribution is tax-free, says Jeff Levine, chief retirement strategist for IRA consulting firm Ed Slott & Co.

You'll receive Form 1099-R reporting the distribution, but the form does not specify that it was a tax-free transfer to charity. If you work with a tax preparer, it's important to let him or her know that it was a qualified charitable distribution so you don't end up paying taxes on the amount. Now that the law permitting tax-free transfers to charity has been extended permanently, Levine says he hopes the IRS will add a code to 1099-Rs specifying that the distribution was a QCD.

For more information about the tax reporting for qualified charitable distributions, see the IRS's IRA FAQs -- Distributions (Withdrawals).

Advertisement
Advertisement

Most Popular

11 Dividend-Paying Stocks You Should Think Twice About
dividend stocks

11 Dividend-Paying Stocks You Should Think Twice About

Dividend-paying stocks often can be a store of safety, but 2020 has been difficult on income equities. These 11 picks look like shaky plays despite th…
September 21, 2020
Medicare Basics: 11 Things You Need to Know
Medicare

Medicare Basics: 11 Things You Need to Know

There's Medicare Part A, Part B, Part D, medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare --…
September 16, 2020
Where You Should Invest Now
investing

Where You Should Invest Now

Kiplinger.com senior investing editor Kyle Woodley joins our Your Money's Worth podcast to answer investor questions about tech stocks, the election a…
September 22, 2020

Recommended

Most-Overlooked Tax Breaks for the Newly Divorced
tax deductions

Most-Overlooked Tax Breaks for the Newly Divorced

Filing taxes after a divorce can add yet another problem to an already long list of challenges. But here are some tips to make your return to single l…
September 18, 2020
When Are 2020 Estimated Tax Payments Due?
tax deadline

When Are 2020 Estimated Tax Payments Due?

If you're self-employed or don't have taxes withheld from other sources of taxable income, it's up to you to periodically pay the IRS by making estima…
September 11, 2020
How to Create Income for Life
Financial Planning

How to Create Income for Life

Having a paycheck you can depend on in retirement is more important than ever.
August 26, 2020
11 Tips on How and When to File an Amended Tax Return
tax returns

11 Tips on How and When to File an Amended Tax Return

What to do if you discover a mistake on a previous tax return (and other reasons for filing an amended return).
August 25, 2020